Correlation Between NYSE Composite and Global Opportunities

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Global Opportunities at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NYSE Composite and Global Opportunities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and Global Opportunities Fund, you can compare the effects of market volatilities on NYSE Composite and Global Opportunities and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NYSE Composite with a short position of Global Opportunities. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Global Opportunities.

Diversification Opportunities for NYSE Composite and Global Opportunities

0.84

Correlation Coefficient

NYSE Composite  Global Opportunities

Very poor diversification

The 3 months correlation between NYSE and Global is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Global Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunities and NYSE Composite is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NYSE Composite are associated (or correlated) with Global Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunities has no effect on the direction of NYSE Composite i.e., NYSE Composite and Global Opportunities go up and down completely randomly.

Pair Corralation between NYSE Composite and Global Opportunities

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.09 times less return on investment than Global Opportunities. In addition to that, NYSE Composite is 1.03 times more volatile than Global Opportunities Fund. It trades about 0.04 of its total potential returns per unit of risk. Global Opportunities Fund is currently generating about 0.05 per unit of volatility. If you would invest  1,102  in Global Opportunities Fund on December 27, 2024 and sell it today you would earn a total of  22.00  from holding Global Opportunities Fund or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  Global Opportunities Fund

Pair Trading with NYSE Composite and Global Opportunities

The main advantage of trading using opposite NYSE Composite and Global Opportunities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Global Opportunities can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Global Opportunities will offset losses from the drop in Global Opportunities' long position.

The idea behind NYSE Composite and Global Opportunities Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.